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Official Exchange Rate to Change Soon, Causing Uncertainty for Depositors

13:36 | 31 كانون الثاني 2023LIMS output
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Official Exchange Rate to Change Soon, Causing Uncertainty for Depositors

In February, Lebanon is set to introduce a new official exchange rate of 15,000 Lebanese pounds (LBP) to the dollar. Previously, the rate was 1,500 LBP to the dollar. Since the announcement, the exchange rate on the black market has been decreasing, reaching 42,000 LBP after peaking at 48,000 LBP. Simultaneously, the central bank raised the exchange rate of the dollar on its electronic exchange platform Sayrafa to 38,000 LBP.

LIMS explained that the momentary appreciation of the LBP on the black market is due to the central bank’s decision to allow residents to buy as many USD as they wanted with their LBP at the favorable exchange rate of 38,000 LBP. In fact, the Sayrafa rate was raised to minimize the margin between the platform and black market. Such a move temporarily reduced the exchange rate. However, this policy is unsustainable as the central bank lacks enough dollars to continue pumping them into the market.

LIMS added that the government failed to develop a solution to depositors being unable to withdraw their dollar-denominated deposits from banks. The central bank has imposed capital controls on withdrawals, and only allows them in LBPs at an unfair exchange rate. Those withdrawals are financed through inflation and the LBP’s collapse. The central bank is trying to control the monetary base and inflation by placing a withdrawal ceiling on depositors in LBPs to prevent people from buying dollars on the black market. Given the withdrawal ceiling and the expansionary monetary policy, banks in Lebanon will not have any problem implementing the new official exchange rate of 15,000 LBP per dollar. Still the divergence between the official exchange rate and the black market rate will continue to harm the economy.

LIMS Media Interviews:

  • The Wealthy, Losers, And Banks…These Are The Beneficiaries Of The “Currency Exchange”, January 5, 2023: Lebanon Debate, Article AR
  • Lebanese Pound Hits All Time Low As Economic Crisis Deepens, January 24, 2023: Al Jazeera, Interview EN
  • Dr. Patrick Mardini: Lebanese Banks Prevent Citizens From Withdrawing Their Dollar Money From Their Bank Accounts, January 19, 2023: Yaman Al Yawm, TV Interview AR